Green Financing

Journal of Banking & Financial Services Vol.
7 Number 1&2 December 2013
Green Banking Practices by the Commercial Banks in Bangladesh: Emphasis on the Policy
Guidelines of Phase I
Md. Jamil Sharif*

Niluthpaul Sarker**
Abstract:
Green banking refers to those efforts to keep the environment green and to minimize greenhouse
effects through rationalizing the strategies, policies, decisions and activities pertaining to banking
service, business and in-house operational activities. The study has been initiated with an objective
to identify the green initiatives taken by the commercial banks within the year 2011 as per the
policy guidelines of Bangladesh Bank. It has been found that among the 34 banks, 31 (91.17%)
banks have approved green banking policies and 33 (97.05%) banks have their own green banking
units. Banks have introduced several in house initiatives such as paperless banking, online banking
system etc. Under green financing, banks are now considering environmental risks in assessing the
clients’ projects and emphasizing on financing in ETP, projects having ETP and bio-gas, solar
panel project, Hybrid Hoffman Kiln (HHK) based brick fields etc. However, effective monitoring
and proper incentives by the Bangladesh Bank and government may magnetize the commercial
banks to take more green initiatives and to contribute in sustainable development.
Key words: Bangladesh Bank, Green banking, GRI reporting, Kyoto Protocol, Sustainable
development, ETP, Green Banking Unit, Environmental Risk management.
Introduction:
Climate change is one of the most complicated and discussed issues across the world. There have
been continuous endeavors to measure and mitigate the risk of climate change caused by reckless
human activity. Bangladesh though a low carbon emitting country is likely to be one of the worst
sufferers of Global warming. Climate change has already enhanced the frequency and intensity of
floods, droughts and cyclones in Bangladesh, and would have negative impact on water resources,
land, crop agriculture and food security, fisheries and livestock, forestry and bio-diversity, and
human health as well (Rahman, 2012).
*Assistant Professor, Department of Accounting & Information Systems, University of Dhaka, Dhaka.
** Assistant Professor, Department of Accounting & Information Systems, Jagannath University, Dhaka.
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Journal of Banking & Financial Services Vol. 7 Number 1&2 December 2013
Government has taken several initiatives to ensure sustainable development in Bangladesh. In

alignment of these initiatives, Bangladesh Bank has also come forward to ensure sustainable
development by providing a framework for the commercial banks regarding their business
activities. As Socially Responsible Corporate Citizens (SRCC), banks have a major role and
responsibility in supplementing government efforts towards substantial reduction in carbon
emission and ensuring sustainable development. Therefore, banking sector can play a crucial role in
promoting environmentally sustainable and socially responsible investment (Sahoo and Nayak,
2008).
Today, about 200 financial institutions have committed to integrate environmental factors into their
operations by signing the UN Environment Programme’s (UNEP) Financial Institutions Initiative.
Among them, more than one fourth (55) is based in developing and emerging countries. In such
context, Green banking, compared to normal banking, gives more weight to environmental factors.
Its aim is to provide good environmental and social business practices. Before sanctioning a loan,
green banks check all the factors to understand whether the project is environment friendly or not
and whether the project has any negative implications in future.
Bangladesh Bank (BB), the central bank of Bangladesh, has already started in house green banking
practices widely. In 27th February 2011, Bangladesh Bank has also circulated a policy guidelines
regarding practice of green activities by all local, foreign and special purpose banks in Bangladesh.
In those policy guidelines, Bangladesh Bank has suggested some strategies for the banks which
should be implemented by the banks as part of green banking concept. Both in house and out house
green banking activities have been encouraged in those policy guidelines.
As per that policy guideline, banking sector has been encouraged to introduce green finance fund
and various green products for the investors at concessional rates. To accelerate this plan,
Bangladesh bank has also set up a Taka 2000 million (USD 30 million) renewable energy fund
under refinancing program for banks and financial institutions investing in green energy including
solar, bio-gas, effluent treatment plant etc. In addition, Bangladesh Bank has also introduced
Environmental Risk Management (ERM) guidelines for banks and financial institutions in January
2011. According to this guideline, banks shall incorporate Environmental and Climate Change
Risk factors as part of the existing credit risk methodology to assess a prospective borrower.
In this perspective, we need to know
a) What roles the banking sector can play in ensuring sustainability?
b) What strategies can be introduced by the commercial banks as part of green banking?
c) What rules and regulations have Bangladesh Bank imposed for the green banking practice?
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d) What initiatives have already been taken by the commercial banks as per the guidelines of
Bangladesh Bank?
Objectives of the Study:
The primary objective of this paper is to highlight the level of compliance of the policy guidelines
by the commercial banks as mentioned in phase 1 of the Bangladesh Bank’s “Policy Guidelines for
Green Banking”. The other objectives of this report are:
i) To be familiar with the concept of green banking.
ii) To identify the implications of Green Banking in ensuring sustainable development.
iii) To identify the strategies followed by the banks under the concept “Green Banking”.
iv) To be familiar with the guidelines of Bangladesh Bank regarding green banking &
Methodology:
This study is based on the information from various secondary data sources. Thirty four (34)
commercial banks have been taken as sample. Among them four are State owned Commercial
Banks and remaining thirty are local private commercial banks. The data collected for the purpose
of this study involves the examination of annual reports of 2011 and websites of the respective
banks along with the Green banking Report 2012 by Bangladesh Bank. Data has been analyzed and
presented through using table and charts.
Literature Review:
Climate change and global warming has emerged as one of most discussed issues all over the
world. The public concern of the state of environment has been growing rapidly in the last few
years, mostly due to unusual weather patterns, rising green house gases, declining air quality, etc
(Zeitlberger, 2007). The state of environment of Bangladesh is also rapidly deteriorating.
Moreover, Bangladesh is considered as one of the most climate change vulnerable countries.
In line with global development and response to the environmental degradation, financial sector can
play important roles as one of the key stakeholders. Banks’ relevance cannot be ignored, in as much
as projects financed by banks are contributing to pollution through carbon and gas emission to the
air and environment (Millat et al., 2012). Climate change has brought business challenges for banks
but has also offered opportunities (Rahman, 2012). Banks have a significant role to play in these
game-changing developments, a role which can only be ensured through timely interventions by a
committed and effective banking system (Millat et al., 2012). The banking sector, as an
intermediary financial institution, can play role between economic development and environmental
protection, for promoting environmentally sustainable and socially responsible investment.
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Generally banks are considered environment friendly and do not impact the environment greatly
through their own ‘internal’ operations. But banks sometimes invest in many hazardous and
environmentally detrimental projects and events which may cause maximum carbon emission. So,
banks need to concentrate hard on those projects which are less detrimental to the environment or
which will reduce carbon emission. To aid the reduction of external carbon emission, bank should
finance green technology and pollution reducing projects (Bahl, 2012).
Douglas (2008) found four key findings: (a) banks are increasingly discussing climate change
business opportunities in their annual reports, (b) twenty eight of the forty banks have
calculated and disclosed their greenhouse gas emissions from operations, (c) growing demand
for climate friendly financial products and services is leading banks into new markets, and (d)
investment banks have taken a leading role in supporting emissions trading mechanisms and
introducing new risk management products.
Banks can assess and give weights to the environmental risks of the projects when evaluating the
loan proposals and finance only those projects which are top rated under green financing fund. So,
green financing through due diligence under Environmental Risk Management (ERM) Guidelines
is not for squeezing investment rather it is for sustainable finance with an improved quality in
banks’ assets. Green financing under green banking would make great contribution towards
transition to a resource-efficient and low carbon industry i.e. green industry and green economy in
general (Rahman, 2012).
It is widely accepted that environmental cautiousness of the business organizations in their
activities also contributes in their financial excellence. There are studies showing positive
correlation between environmental performance and financial performance (Hamilton, 1995; Hart,
1995; Blacconiere and Pattern, 1993 cited in Habib, 2011). Several studies have also shown that
there is positive relationship between the environmental management and a company’s intangible
assets such as reputation, staff commitment, business excellence and competitive advantage. The
intangible benefits of involving employees in an environmental protection scheme may actually
prove to be higher ( ECO:FACT, 2002).
Green banking is considered as eco friendly banking. It creates different image about the banks. It
is more about focusing on ‘mother planet and its sustainability’, shifting from traditional approach
on ‘profit’ or even ‘people’ (Habib, 2010a). Green banking, which considers all the social and
environmental factors, is also called ‘ethical banking’.
The positive behavior of the business organizations to the environment also help to increase their
market reputation in the capital market and help to collect fund at lower costs. Stock prices reward
the announcement of superior environmental performance such as greater pollution control or the
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adoption of cleaner technologies (ECO:FACT, 2002). There are also few cases where
environmental management system has resulted in cost savings, increase in bond value etc (Heim,
G et al, 2005 cited in Habib, 2011). So, compliance with green banking policies will not incur only
costs for the banks, it will also increase the acceptability of the good performed banks by the
stakeholders.
Banks and Sustainability
The industrial development in the 19th century has made notable changes in the elements of
environment. This development has made an important contribution on uplifting the usage of
machines and technology. As a consequence, we have observed many positive as well as some
negative impacts as byproducts of the excessive uses of this technology on our life and
environment. The major sought negative impacts are increase in global warming, ozone depletion,
environment pollution and loss of natural resources etc.
Various nationally and international efforts have already been taken to protect the environment
from the negative outcomes of the excessive use of machinery and technology. Central to this is the
United Nations Framework Convention on Climate Change (UNFCCC), which produced the Kyoto
Protocol in 1997. This agreement has set binding targets for 37 industrialized countries and the
European community with the principle of “common but differentiated responsibilities” for
reducing greenhouse gas (GHG) emissions which amounts to an average of five per cent over the
five-year period 2008-2012 against 1990 levels.
Governments from different countries agreed to adopt a universal legal agreement on climate
change by 2015 in Durban Climate Conference 2011. The Accord in the most recent UNFCCC
negotiations has led all major countries publishing plans voluntary how they will slow or cut their
emissions over the coming decades and to make a financial pledges (US$30 billion over the three
years to 2012, and US$100 billion a year by 2020).
The green banking framework is initially based on the concepts of market failure public goods and
externalities. The outcome of the negative externality (air pollution, water pollution, GHG
Emission etc) is called Global Public Bads (Global warming, Contamination from pollution,
Disruption of Eco-system etc). In economic theory, the green initiatives to handle these negative
externalities and Global Public Bads are called as Global Public Goods (Habib, 2011). Green
Banking can help to create effective and far-reaching market-based solutions of environmental
problems, including climate change, deforestation, air quality issues and biodiversity loss, while at
the same time identifying and securing opportunities that benefit customers (Habib, 2011).
Figure-01: A Framework of Environmental Degradation and Green Initiatives (Habib 2010)
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Concept of Green Banking:

Green banking in general refers to the efforts of the Banking sector to keep the environment green
and to minimize greenhouse effects through rationalizing their strategies, policy, decisions and
activities pertaining to banking service, business and in-house operational activities. Green banking
may be seen as a component of the global initiative from Banks end to save environment. Green
banks or environmentally responsible banks do not only improve their own standards but also affect
socially responsible behavior of other business.
So, Green Banking should conducted banking business in selected area and manner that helps the
overall reduction of external carbon emission as well as internal carbon footprint. It emphasizes on
promoting environmental friendly practices and reducing carbon footprint from banking activities.
As part of in house practice, banks can adopt technology, process and products which result in
substantial reduction of their carbon footprint. These may be done through adopting paperless
banking, paperless internal communication, electronic correspondence and reporting, online
banking system and by encouraging their customers to switch over to electronic transactions.
On the other hand, banks can finance only those activities which are less detrimental to the
environment or on those projects which have been taken as an initiative to reduce carbon emission.
Such activities may include establishment of ETP, projects having ETP, bio-gas plant project, solar
panel project, Hybrid Hoffman Kiln (HHK) based brick fields etc. That means energy efficient
products or any project for possible safeguards and mitigating hazards due to environmental
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condition or climate change can be financed under Green financing program. Besides, banks can
include Environmental Risk Impact Assessment (EIA) in their project appraisal while financing any
project.
For these reasons, a Green Bank is now called as ethical bank, a socially responsible bank and a
sustainable bank and has been identified as one of the major drivers of environment friendly
sustainable economic growth.
Green banking strategies:
Green banking strategies involves two components (1) managing environment risk and (2)
identifying opportunities for innovative environmentally oriented financial products (IFC, 2007
cited in Sahoo and Nayak, 2008). The banking and financial institutions should prepare an
environmental risk and liability guidelines on development of protective policies and reporting for
each project they finance or invest (Jeucken, 2001 cited in Sahoo and Nayak, 2008). Various tools
and techniques can be used by the banks for becoming greener in practice. Some strategies that can
be used by the banks to be greener are mentioned below:
a) Green banking financial product: Banks can develop innovative green banking financial
products which directly or indirectly can help in the reduction of carbon emissions. Eco friendly
business activities and energy efficient industries will be given preference in financing by bank.
Environmental infrastructures such as establishment of ETP, projects having ETP, bio-gas plant,
bio-fertilizer plant, solar panel/renewable energy plant, solar irrigation pumping station, solar home
system, solar PV module assembling plant, Hybrid Hoffman Kiln (HHK) brick fields etc should be
encouraged and financed by bank. Energy efficient products or any project for possible safeguards
and mitigating hazards due to environmental condition or climate change can be financed under
Green financing program.
Banks such as Citigroup Inc., Bank of America, and JP Morgan Chase & Company are just a few
of the mortgage lenders offering special discounts on mortgages used to build or update buildings
and homes to be more green.
b) Carbon footprint reduction: Carbon footprint is a measure of the Green House Gases (GHG).
Banks can reduce carbon footprints by adopting paperless banking, paperless internal
communication, electronic correspondence and reporting, online banking system and by
encouraging their customers to switch over to electronic transactions. The in house activities of
banks may cover:
i) Energy Consciousness: Developing energy consciousness through adopting effective
office time management, automation solutions, using compact fluorescent lighting (CFL)
and renewable energy (solar, wind, etc.)
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ii) Using Mass Transportation System: Banks can become fuel efficient by providing
common transport for group of officials and by converting its all vehicles in CNG driven.
iii) Green Buildings: New as well as old braches of Banks should be constructed under the
concept of green buildings for their office and employee accommodation. These will also
save the operational costs of the banks.
c) Social responsibility services: As a corporate citizen, banks can initiate various social
responsibility services such as tree plantation camps, maintenance of parks, pollution checkup
camps etc.
Green banking product coverage:
Green banking products have been designed keeping in mind that these are not harmful for the
environment or will consume less energy and reduce carbon emission. Introduction of online
banking, paying bills on online, Open up CDs and money market accounts at online banks, more
ATM booths, mobile banking etc are the biggest steps to support green initiatives. Green Banking
helps to create effective and far reaching market based solutions to address a range of
environmental problems, including climate change, deforestation, air quality issues and biodiversity
loss, while at the same time identifying and securing opportunities that benefit customers. For the
purpose of serving the society, the various green financing products have been developed under the
concept of green banking. Among these, the most used products that can be used by the banks are:
Green mortgages, Green loans, Green credit cards, Green savings accounts, Green checking
accounts, Green CDs, Green money market accounts, Mobile Banking, Online banking, Remote
deposit (RDC) etc.
Green Banking practice in Bangladesh:
To encourage the practice of green banking by the commercial banks, Bangladesh Bank has
published a policy guideline of green banking as ”Policy Guidelines for Green Banking” on 27 th
February, 2011. This is a three (3) year based policy guidelines. These guidelines cover both in
house as well as outhouse activities in three different phases. However, Bangladesh Bank has
already started various green banking activities in its own house. It feels urge to create good image
about green banking practice internally and want to set a benchmark to the whole banking industry
of Bangladesh.
a) Bangladesh Bank’s in house practice of Green Banking: As part of in house green banking
practice, Bangladesh bank has already established itself as paperless bank. All the departments of
Bangladesh Bank Head Office and its nine branch offices have already been brought under a
computer network (LAN/WAN), connecting almost 3,100 PCs. Bangladesh Bank neither accepts
any paper based communications from banks and financial institutions nor accepts any paper based
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applications from jobseekers. E-tendering has already been introduced there. Introduction of
Bangladesh Automated Clearing House (BACH), Bangladesh Electronic Fund Transfer Network
(BEFTN), Establishment of a National Payment Switch (NPS), The Bangladesh Automated
Clearing House (BACH), The Enterprise Data Warehouse (EDW) and automated CIB practices
have made its efforts more successful. Bangladesh Bank is also encouraging paperless accounting,
planning, budgeting and payments within Bangladesh Bank and also the government in a
transparent way through use of the Enterprise Resource Planning (ERP) system.
Bangladesh Bank has also started practicing video conference to communicate with branch offices.
It has put up the largest solar panel producing 8 kilowatt on March 2010 on its roof and is using
LED bulbs to reduce energy consumption. Online salary and other necessary advice, personnel file
updated information, office orders, notification about on-line balance statements for all members
employee of Bangladesh Bank, an electronic pass for visitors etc have been incorporated.
Bangladesh bank has set up a renewable energy fund amounting TK 2,000 million (USD 30
million) under refinancing program for banks and financial institutions investing in green energy
including solar, bio-gas, effluent treatment plant etc. In the year 2011, TK 132.21 million was
invested by the banks in the Bio gas plant projects under refinancing scheme. The various projects
along with amount invested are presented below:
Table-01: Amount Disbursed under Refinancing Scheme (In Million Taka)

Projects December, 2011
Solar irrigation pumping station 18.87
Solar home system 59.37
Bio-gas 132.21
ETP 20.78
HHK 20
Solar PV module assembling plant Nil
Source: Green Banking Report-2012, BB
b) Bangladesh Bank’s green initiatives for the banking industry:
According to the BRPD Circular 02 dated February 27, 2011, the policy guideline for green
banking should be implemented by the banks in three different phases by the year 2011, 2012 and
2013 consecutively. The guideline assures that the compliant banks would get preferential
treatment like reward points for CAMELS rating and priority in getting approval for new branches.
Besides, the names of top ten banks for their overall performance in green banking will be posted
on the central bank websites.
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Banks shall report their green banking initiatives/activities under the said program to the
Department of Off-site Supervision of Bangladesh Bank on quarterly basis. The first report shall be
submitted within 15th July 2011 containing information up to 30th June 2011 and similarly they will
be required to continue to submit reports on the subsequent quarters within the next 15 days of the
respective quarter end.
The guidelines for introducing green banking practice by the banks are described below phase by
phase.
Phase-1(1st January 2011-31st December 2011):
According to the guidelines of phase 1, banks are required to formulate and adopt a broad
environmental or Green Banking policy and strategy approved by their Board of Directors in case
of local commercial banks and by their Regional Head/Competent authority in case of foreign
commercial banks operating in Bangladesh. Major emphasize has been given on policy making first
because if policy is not there or if it is not approved by the competent authority, then the adaptation
and implementation of Green Banking activities may be trackless.
Banks should establish a green unit or cell responsible for designing, evaluating and administering
related green banking issues of the bank and allocate a fund in budget for green banking practice
which will include (i) Budget for Green Finance (ii) Budget for Climate Change Risk Fund and (iii)
Budget for Marketing & Capacity Building for Green Banking. Bank shall also incorporate
Environmental and Climate Change Risk as part of the existing credit risk methodology on
Environmental Risk Management (ERM) as prescribed on January 2011 to assess a prospective
borrower.
Banks should introduce in house green banking initiatives like use of paper on both sides for
internal consumption, introduction of e-statement for customers, use of online communication
among the employees, using more daylight instead of electric lights and proper ventilation in lieu of
using air conditioning, using energy saving bulbs, use of Eco Font for printing, avoid disposable
cups/glasses, Video/Audio conference in lieu of physical travel, conversion of Bank’s vehicles into
CNG and use of energy efficient electronic, use of solar energy/ renewable energy sources etc.
Eco friendly business activities and energy efficient industries will be given preference in financing
by bank. Environmental infrastructure such as Financing Green Projects/Events such as ETP,
projects having ETP, bio-gas plant, bio-fertilizer plant, solar panel/renewable energy plant, solar
irrigation pumping station, solar home system, solar PV module assembling plant, Hybrid Hoffman
Kiln (HHK) should be encouraged and financed by bank. Any project/event financed by banks for
producing energy resource efficient products or any project/event financed by banks for possible
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safeguards and mitigating hazards due to environmental condition or climate change and others
should also be financed under Green financing program.
Bank should finance the economic activities of the flood, cyclone and drought prone areas at the
regular interest rate without charging additional risk premium. However, banks should create a
Climate Change Risk Fund. The Climate Risk Fund will cover (i) Fund for part of CSR activities
(Event) that are related to Climate Change Risk and (ii) Fund for part of CSR activities (Project)
related to Climate Change Risk.
Banks should introduce Green products and conduct an awareness development programs among
the common people. Banks should emphasize on the introduction of Online banking such as
making bank transactions or paying bills via the Internet. Banks should give more emphasis to
make the easiest way to help environment by eliminating paper waste, saving gas and carbon
emission, reducing printing costs and postage expenses. Banks should also establish ATM booths
as many as possible and those ATM booths should be powered by solar energy.
Banks should arrange employee awareness development and training programs on environmental
and social risk and the relevant issues on continuous basis. Awareness development programs may
also be conducted among consumers and clients under its public relation department. Each bank
shall report on the initiatives and practices taken within the period 31st December 2011 to Off-site
Division of Bangladesh Bank and disclose in their respective websites.
Phase -2 (1st January-31st December 2012)
In the second phase, banks are advised to take specific policies for different environmental
sensitive sectors such as agriculture, poultry, dairy, farming, tannery, fisheries, textile and apparels,
renewable energy, pulp and paper, sugar and distilleries, construction and housing, engineering and
basic metal, chemicals, rubber and plastic industry, hospital and clinic, chemical trading, brick
manufacturing and ship breaking. According to the guideline, banks will also adopt a green
strategic plan, determining their target for green banking and developing a system of environment
management. For in-house environment management, the target areas should cover attaining
energy efficiency in the form of the use of renewable energy, reduction of electricity, gas, and
petrol consumption, reduction of Green House Gas(GHG) emissions, issuance of e-statements,
electronic bill pay, saving papers, environment friendly office buildings etc.
For Green Financing, the target areas should cover reducing loans for certain environmentally
harmful activities, attaining a particular percentage of environmental loans as percentage of total,
introducing eco-friendly financial products etc.
The newly established branch should be featured by the provision of the maximum use of natural
light, use of renewable energy, use of energy saving bulbs and other equipments, reduced water and
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electricity use, use of recycled water etc. Bangladesh Bank will approve a logo for such type of
branch and should be specifically designated as a ‘Green Branch’.
Banks should also formulate specific environmental risk management plan and guidelines and start
rigorous programs to educate clients.
In this phase, banks should start publishing independent Green Banking and Sustainability reports
showing past performances, current activities, and future initiatives. Updated and detailed
information about banks environmental activities and performances of major clients should also be
started to disclose.
Phase-3 (1st January 2013-31st December 2013)
The last phase will start form 1st January 2013 and will come to an end on 31st December 2013. The
banks are advised in this phase to take some important initiatives for making their green practice
more fruitful. Banks should place a system of Environmental Management before the initiation of
this Phase-3. Standard environmental reporting with external verification should be part of this
phase. Banks should Design and introduce innovative products alongside avoiding negative impacts
on environment.
Banks should publish independent Green Annual Report following internationally accepted format
like Global Reporting Initiatives (GRI) targeting their stakeholders.
Analysis and Findings:
As per the requirements of the policy guidelines under Phase 1, all the banks should submit report
to the Off-site Division of the Bangladesh bank showing the level of compliance of the said
guidelines. The banks will also provide information in their respective web sites. Bangladesh Bank
will publish a list of the top ten banks on the basis of their level of compliance.
We have collected our required information from annual reports and websites of the respective
banks. We have also gathered necessary information from the Green Banking Report produced by
the respective authorities of the Bangladesh Bank. Analysis of that information has revealed the
following facts:
Figure 2: Policy guidelines as per the requirements of Phase 1.
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a) Policy Formulation and Governance:

As per the guidelines, commercial banks will have to adopt a comprehensive green banking policy
to make banking practices more responsible to social and environmental issues. Out of 34
commercial banks, 31 (91.17%) banks have already formulated their own Green Banking Policy
Guidelines and that guidelines were approved by their respective Board of Directors/Competent
authority. The remaining three (Rupali Bank Ltd, National Bank Ltd, Brac Bank Ltd.) are yet to
formulate their own policy for Green Banking.
Chart-01: Formulation and approval of Green Banking Policy
Yes No
9%
91%
Source: Appendix (A)

Banks are required to establish a separate Green Banking Unit or Cell having the responsibility of
designing, evaluating and administering related green banking issues of the banks. We have found
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that all the banks (97.05%) except the Sonali Bank Ltd have formed a Green Banking Unit (GBU)
for acclerating Green Banking activities.
Chart-02: Formulation of Green Banking Unit
Yes No
3%
97%
Source: Appendix-1 (B)

b) Incorporation of environmental risk in CRM: Banks shall comply with the instructions
stipulated in the detailed guidelines on Environmental Risk Management (ERM). Bank shall
incorporate Environmental and Climate Change Risk factors as part of the existing credit risk
methodology and shall make ratings of the projects. The highest rated proposals must be given
priority in sanctioning loans. Most of the commercial banks have complied with this rule for better
credit risk management. In the following table and chart, the no of rated projects financed along
with the amount disbursed in favor of the rated projects are given:
Table 02: No of projects rated and No of rated projects financed by the top 10 Banks
Name of the Banks No of projects rated No of rated projects financed
AB Bank 1874 1874
Uttara 775 775
Bank Asia 352 352
Estern 271 271
Trust 240 240
One 151 144
Al-Arafa 114 107
SIBL 53 53
ICB Islamic 42 23
Prime 39 39
Source: Appendix (C & D)
Chart: 3 Amount disbursed in favor of rated projects (In Million TK)
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80000
70000
60000
50000
40000
30000
20000
10000
0
Source: Appendix (E)

c) Introducing green finance: Eco friendly business activities and energy efficient industries will
be given preference in financing by bank. Environmental infrastructure such as renewable energy
project, clean water supply project, wastewater treatment plant, solid & hazardous waste disposal
plant, bio-gas plant, bio-fertilizer plant should be encouraged and financed by bank.
Among the 34 commercial banks, Islami Bank Bangladesh limited has achieved the top position in
financing projects having ETP (TK 26,567.90 million). Bank Asia has hold second position by
financing TK 21,675 million in the year 2011. But amount financed by the other banks in the
projects having ETP is not very significant. In the year 2011, we also have found that banks have
given priority in finaning the projects having ETP rather than the projects having no ETP. It carries
good sign of adoption of green banking practice by the commercial banks.
Table-03: Comparison of financing in projects having ETP and projects other than having
ETP by Top 10 Banks (In Million Taka)
Banks Financing in projects Financing in projects other
having ETP than having ETP
Islami Bank 26,567.9 0
Bank Asia 21,675 402.51
Pubali Bank 15,388 2,829.4
Southeast Bank 11,266.4 0
AB Bank 9,072.77 102.53
Standard Bank 7,628.8 4
One Bank 4,722.3 132.53
Dutch Bangla Bank 3,557.51 56.23
Prime Bank 2,784.41 302.99
Sonali Bank 2,759.67 4,831.67
Source: Appendix (F & G)
Bangladesh bank set up a renewable energy fund amounting TK 2,000 million (USD 30 million)
under refinancing program for financing in solar, bio-gas, effluent treatment plant etc. In the year
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2011, TK 132.21 million was invested by the banks in the Bio gas plant projects under this scheme.
Among them, Trust bank, Mutual Trust Bank and National Bank have financed TK 51.5 million in
Bio gas plant projects. On the other hand, Prime Bank and Mercantile Bank have financed TK 10.7
million for financing Effluent Treatment Plants (ETP). Mutual Trust Bank Ltd and Al Arafah
Islami Bank Ltd are now in leading position in financing the solar home systems.
Table 04: Financing of Solar Home systems
Banks Amount Disbursed (Tk million) No. of clients
MTBL 59.3 2167
Al Arafah Islami Bank 20.0 350
AB Bank 3.5 167
National+Uttara+Rupali+Jamuna 8.5 402
d) Creation of climate risk fund:

A Climate Risk Fund is required as a precautionary measure for possible safeguards and mitigating
hazards due to climate change. Bank should finance the economic activities of the flood, cyclone
and drought prone areas at the regular interest rate without charging additional risk premium.
Banks should assess their environmental risks for financing the sectors in different areas for
creating a Climate Change Risk Fund. The fund could be created as part of banks’ CSR expenses.
Pubali Bank, United Commercial Bank, National Bank, Dutch-Bangla Bank, Mutual Trust Bank,
Bank Asia, Al-Arafah Islami Bank, ICB Islamic Bank, Social Islami Bank, Shahjalal Islami Bank
are in top position in creating such type of risk fund.
e) Online Banking:
Most of the banks have been offering 24-hour banking services through their countrywide ATM
booths. People have easy and instant access to banking services through using these ATMs. Dutch-
Bangla Bank Ltd. (DBBL) has taken the leading position by having 1994 ATM booths across the
country. In comparison to DBBL, other are banks are far behind. BRAC Bank Ltd has the second
highest ATM Booths which is 305.
Chart-04: No of own ATM Booths by the Banks
16
2000
1800
1600
1400
1200
1000
800
600
400
200
0
Source: Appendix (H)

Most of the banks except Uttara are providing online service to their customers. Government banks
are also lagging behind in providing such facilities to the customers (See Appendix I). In case of
providing internet banking facilities, only 14 banks provide such facility and among them Eastern
Bank is on the top position. Approximately 17.38% of its account holders enjoy this facility. EXIM
bank Ltd and Trust Bank Ltd are in the second and third position consecutively in providing
internet banking service to their customers (5.34% and 5.30% respectively).
Chart-5: % of accounts facilitated with Internet Banking
18
16
14
12
10
8
6
4
2
0
Source: Appendix (J)

Among the 34 banks, only 13 banks are providing SMS or phone banking. Among them, Eastern
Bank Ltd and BRAC Bank Ltd are providing this facility to 25.25% and 19.07% account holders
respectively.
17
Table-05: % of Customers having SMS or Phone banking facility

Banks % of Customers
Eastern Bank 25.25
BRAC Bank 19.07
Dutch Bangla Bank 5.34
Islami Bank 4.31
Trust Bank 3.29
The City Bank 2.74
Dhaka Bank 1.89
Mutual Trust Bank 0.43
Jamuna Bank 0.38
Premier Bank 0.2
Bank Asia 0.08
Janata Bank 0.06
U.C.B.L. Bank 0.06
Source: Appendix (K)
f) Disclosure and reporting of green banking activities: Banks shall report on the
initiatives/practices to BB and disclose in their respective websites. All the banks have provided
their report regarding green banking activities to the Off-site Division of the Bangladesh Bank on
due time. In case of publishing information regarding green banking activities, twenty seven (27)
banks have not provided any information about their green banking activities. Only seven (7) banks
(UCBL, Dhaka, Pubali, Mercantile, Trust, ICB Islamic, Shajalal Bank) have disclosed their
information regarding green banking activities. However, Dhaka Bank has disclosed the same
policy guidelines as promulgated by the Bangladesh Bank without preparing for their own one.
Recommendations:
Though all the commercial banks of Bangladesh are trying to follow the policy guidelines of green
banking, but the outcomes of those practices are not satisfactory up to the end of Phase 1
(December 2011). Many banks have failed to comply with the regulations and guidelines
mentioned in the policy. Again, time frame provided for implementing green banking policy is not
sufficient enough to follow all the regulations. On the basis of our findings from analysis, we
recommend some suggestions for improving the practice of Green Banking by the Bangladeshi
commercial banks:
i) The members of BODs and top management of the commercial banks should be
motivated to follow the guidelines of the BB regarding green banking policies and it
should be given priority on their planning and budgeting
ii) Effective training program should be initiated by the respective banks for their
employees for making them more conscious about in house green banking practice and
in financing various projects.
18
iii) Government and Bangladesh Bank should take initiatives to inspire the banks in
practicing green banking by allowing tax rebate and higher credit deposit ratio.
iv) Internet banking and SMS banking should be introduced largely by all the commercial
banks.
v) The top ten banks as assessed by the Bangladesh Bank may be encouraged by giving
rewards for their green initiatives.
vi) Amount invested by the banks for their environmental up gradation and reduction of
emission of Green House Gas (GHG) may be considered as CSR activities and may be
given tax rebate on such type of expenditures.
vii) All amount expended by the Commercial banks for in house green banking activities
may be considered as allowable deductions for tax calculation purpose.
viii) Time frame for compliance with all the regulations according to “Policy Guidelines for
GB” by Bangladesh Bank is not adequate. Banks should be given reasonable time
period to comply with the stipulated guidelines of the Bangladesh Bank.
ix) Report on Green Banking activities should be duly published by the respective banks
through their websites and annual reports.
x) Green Banking may be introduced in undergraduate course curriculum for creating
awareness among the students for making them more conscious about environment.
Conclusion:
The status of environmental management has not been satisfactory in many developing countries,
largely due to poor enforcement of existing laws and policies, lack of incentives and inadequate
pressure from civil society and interest groups (Habib, 2010). So, it is our responsibility to maintain
Environmental conservation and protect ecological balance through combined efforts of multi stake
holders. Along with the policies and guiding support from Bangladesh bank, the government,
businesses, NGOs and consumers can also influence more in the development of green banking
practices in our country. Most of the banks have already taken initiatives to follow all the
guidelines as mentioned in phase one but the level of outcome is not satisfactory yet. For the
positive outcomes of these initiatives, active participation by the related parties from their own
standings is prerequisite. However, the time frame stipulated for implementing the guidelines
seems too short from the perspective of the banks. Again, Banks as a business entity will be
interested mostly in implementing all the policy guidelines of Green banking when they will find it
more beneficial over costs. Proper monitoring and lucrative incentives by Bangladesh Bank as well
as Government for the commercial banks will accelerate the success of the green initiatives in
Bangladesh.
19
20
References:
Bangladesh Bank (2011), Review of CSR Initiatives in Banks (2011), Dhaka, Bangladesh,
available at http://www.bangladesh-bank.org/.
Bangladesh Bank (2011), Policy Guidelines for Green Banking, BRPD Circular No.02, 2011,
available at available at http://www.bangladesh-bank.org
Bank Track, Environmental Records of Chinese Banks, A bank Track report, China, available at
http://www.banktrack.org/download/environmental_record_of_chinese_banks_2010/environmental_rec
ords_of_chinese_banks_2010_eng.pdf.
Bahl, S. (2012), Green Banking-The New Strategic Imperative, Asian Journal of Research in
Business Economics and Management, Vol 2, Issue 2, India.
ECO:FACT (2002), Environmental Management Systems and risk reduction in developing
economies in Sustainable Business Investor – Worldwide (SBI), Issue 2, available at
http://www.scribd.com/doc/77357086/ECOFACT-Towards-Green-Banking.
Bangladesh Bank (2011), Environmental Risk Management Guidelines for Banks and Financial
Institutions in Bangladesh, available at http://www.bangladesh-bank.org.
Habib, S. M. A. (2010a), Green banking initiatives: Opportunities for Bangladesh, Bank
Parikrama, Vol XXXV and XXXVI, September 2010, BIBM, Dhaka.
Habib, S. M. A. (2010b), Responsibilities of Banks in Environmental Protection in US Economy:
Lessons for Bangladesh Banking Sector, Post Doctoral Research Report under Fulbright
fellowship, Syracuse University, USA.
Habib, S. M. A., Pandit, A. C. and Mizan, A. N. K. (2010c), Environmental Responsibilities of
Banks: A Proposed Framework for Banking Sector of Bangladesh, Banking Research Series, pp
151-194, BIBM, Dhaka.
Habib, S. M. A., Ullah, M. S. and Rahman, T. (2011), An Impact Evaluation of Green Initiatives of
Bangladesh Bank, Banking Research Series 2011, BIBM, Dhaka.
Hossain, M., Islam, K. and Andrew, J. (2006), Corporate Social and Environmental Disclosure in
Developing Countries: Evidence from Bangladesh, Faculty of Commerce Paper, University of
Wollongong, Australia.
Millat, K. M., Kanta, R. A., Khan, M. M. R. and Karmaker, A. K., (2012), Green Banking Report
March 2012, Bangladesh Bank’s Initiatives and Bank’s Activities, Coordination Cell for Green
banking, Bangladesh bank.
Rahman, A. (2012), Climate Change and Banking Sector of Bangladesh, Seminar Speech available
at
http://www.bibm.org.bd/index.php?option=com_content&view=category&layout=blog&id=1&Itemid=30
&limitstart=22
21
Sahoo, P. and Nayak, B. P (2008), Green Banking In India, Institute of Economic Growth,
Discussion paper series No 125/2008, India.
Shamsudoha, M. (2005), Green Marketing and its implications: Problems in Bangladesh, Pakistan
Journal of Social Sciences, Vol.3 (3), pp-216-224.
Shamsudoha, M. and Alamgir, M. (2009), Application of Green Product Concept in Bangladesh,
available at http://ssrn.com/abstract=1486173.
UNEP Finance Initiative (2011), UNEP FI Guide to Banking & Sustainability available at
http://www.unepfi.org/fileadmin/documents/guide_banking_statements.pdf.
Zeitberger, Jurgen (2007), Sustainability in the Banking Sector, USA: VDM.
Appendix
1. Statement of Policy Formulation
Serial Formulation and approval of Green Banking Formulation of Green Banking

No. Bank Name Policy Unit
1 Sonali Y N
2 Janata Y Y
3 Agrani Y Y
4 Rupali N Y
5 The City Y Y
6 UCBL Y Y
7 AB Bank Y Y
8 IFIC Y Y
9 National N Y
10 Uttara Y Y
11 Pubali Y Y
12 Eastern Y Y
13 NCCBL Y Y
14 Dhaka Y Y
15 Southeast Y Y
16 Prime Y Y
17 DBBL Y Y
18 Mercantile Y Y
19 One Y Y
20 EXIM Y Y
21 Premier Y Y
22
22 Standard Y Y
23 FSIBL Y Y
24 BCBL Y Y
25 Mutual Trust Y Y
26 Trust Y Y
27 Bank Asia Y Y
28 Al-Arafa Y Y
29 ICB Islamic Y Y
30 Islami Y Y
31 SIBL Y Y
32 BRAC N Y
33 Jamuna Y Y
34 Shahjalal Y Y
2. Statement of Green Finance by Banks (In Million Tk)
Serial No Bank Name Projects having ETP Projects other than having ETP
1 Sonali 2759.67 4831.67
2 Janata 1104 198
3 Agrani 0 80.6
4 Rupali 1871.81 587.59
5 The City 1172.74 105.75
6 U.C.B.L. 722.88 91.93
7 AB Bank 9072.77 102.53
8 IFIC 2264 0
9 National 0 0
10 Uttara 0 87.7
11 Pubali 15388 2829.4
12 Eastern 384.17 170.52
13 NCCBL 12.23 25.35
14 Dhaka 794.7 44.2
15 Southeast 11266.4 0
16 Prime 2784.41 302.99
17 Dutch Bangla 3557.51 56.23
18 Mercantile 0 18.84
19 One 4722.3 132.53
20 EXIM 0 0
23
21 Premier 0 0
22 Standard 7628.8 4
23 First Security 0 0
24 BCBL 0 0
25 Mutual Trust 0 53.87
26 Trust 18.13 115.7
27 Bank Asia 21675 402.51
28 Al-Arafa 423.74 47.61
29 ICB Islamic 0 0
30 Islami 26567.9 0
31 SIBL 1950 0
32 BRAC 0 128
33 Jamuna 186.8 0
34 Shahjalal 1407.1 12.76
3. Statement of Environmental Risk Rating by Banks
Serial Bank No. of projects No. of Rated projects Amount disbursed in favor of rated
No Name Rated Finance projects (In Million TK)
1 Sonali 23 23 6082
2 Janata 0 0 0
3 Agrani 0 0 0
4 Rupali 0 0 0
5 The City 0 0 0
6 U.C.B.L. 0 0 0
7 AB Bank 1874 1874 79217.7
8 IFIC 25 25 7286.94
9 National 0 0 0
10 Uttara 775 775 3313.59
11 Pubali 30 30 10934
12 Estern 271 271 43066
13 NCCBL 0 0 0
14 Dhaka 0 0 0
15 Southeast 0 0 0
16 Prime 39 39 8464.91
17 DBBL 0 0 0
18 Mercantile 0 0 0
19 One 151 144 22290.13
20 EXIM 0 0 0
21 Premier 2 2 1070.46
22 Standard 0 0 0
23 FSIBL 0 0 0
24
24 BCBL 0 0 0
25 MTBL 19 19 8385.41
26 Trust 240 240 23999
27 Bank Asia 352 352 6075
28 Al-Arafa 114 107 10732.09
ICB
29 Islamic 42 23 297.7
30 Islami 2 2 143.69
31 SIBL 53 53 7435.71
32 BRAC 18 18 900
33 Jamuna 12 10 159
34 Shahjalal 0 0 0
4. Statement on ATM, Internet and Mobile/ SMS Banking by Banks
No % of branches % of accounts % of accounts

Serial Bank of providing Online facilitated with Internet facilitated with
No. Name ATM banking services Banking SMS/Phone Banking
1 Sonali 52 9.08 0 0
2 Janata 6 0.46 0 0.06
3 Agrani 6 7.59 0 0
4 Rupali 0 1.99 0 0
5 The City 123 100 0 2.74
6 U.C.B.L. 2 100 0 0.06
7 AB Bank 204 100 1.16 0
8 IFIC 3 100 1.95 0
9 National 0 100 0 0
10 Uttara 0 0 0 0
11 Pubali 6 75.37 0 0
12 Eastern 2 100 17.38 25.25
13 NCCBL 40 100 0 0
14 Dhaka 34 100 4.09 1.89
15 Southeast 18 100 0.58 0
16 Prime 100 100 1.74 0
17 DBBL 1994 100 1.82 5.34
18 Mercantile 22 100 0 0
19 One 20 100 0 0
25
20 EXIM 10 100 5.34 0

21 Premier 0 100 0 0.2
22 Standard 2 100 0.16 0
23 FSIBL 0 100 0 0
24 BCBL 2 16.67 0 0
25 MTBL 93 100 1.04 0.43
26 Trust 74 100 5.3 3.29
27 Bank Asia 63 100 1.41 0.08
28 Al-Arafa 10 100 0 0
ICB
29 Islamic 10 100 0 0
30 Islami 141 100 0.58 4.31
31 SIBL 10 100 0 0
32 BRAC 305 100 2.74 19.07
33 Jamuna 57 100 0 0.38
34 Shahjalal 0 100 0 0
26

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Journal of Banking & Financial Services Vol.

7 Number 1&2 December 2013

Md. Jamil Sharif*

Government has taken several initiatives to ensure sustainable development in Bangladesh. In

Concept of Green Banking:

Table-01: Amount Disbursed under Refinancing Scheme (In Million Taka)

a) Policy Formulation and Governance:

Source: Appendix (A)

Source: Appendix-1 (B)

Source: Appendix (E)

AB Bank 3.5 167

National+Uttara+Rupali+Jamuna 8.5 402

d) Creation of climate risk fund:

Source: Appendix (H)

Source: Appendix (J)

Table-05: % of Customers having SMS or Phone banking facility

Serial Formulation and approval of Green Banking Formulation of Green Banking

2. Statement of Green Finance by Banks (In Million Tk)

3. Statement of Environmental Risk Rating by Banks

4. Statement on ATM, Internet and Mobile/ SMS Banking by Banks

No % of branches % of accounts % of accounts

20 EXIM 10 100 5.34 0

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